352 SUPREME COURT REPORTS ANNOTATED

Is Certificate of Public Convenience Necessary To Be

Classified As Common Carrier?

ANNOTATION

IS CERTIFICATE OF PUBLIC CONVENIENCE

NECESSARY TO BE CLASSIFIED AS COMMON
CARRIER?
By *
ROGELIO E. SUBONG

_________________

I. Introduction, p. 353
II. Nature of a Certificate of Public Convenience,
p. 354

a) CPC Defined, p. 354

b) Contents of Decision & Form of Diploma-Type CPC,
p. 356

III. Rationale of CPC, p. 357

IV. Three (3) Requisites For the Issuance of a
CPC, p. 359

a) Filipino citizenship, p. 359

b) Financial capacity, p. 360
c) Public need, p. 360

V. Nature of a Common Carrier, p. 361

a) Common carrier defined, p. 361

b) Types of public services, p. 363

VI. Elements of a Common Carrier, p. 364

 VII. Nature of Private Carrier, p. 364

a) Private carrier defined, p. 364

b) Two (2) Luzon Brokerage cases, p. 366

VIII. Is A CPC Necessary To Be Classified As

Common Carrier?, p. 366

a) Degree of diligence required of a common carrier, p.

366
b) Degree of diligence required of a private carrier, p.
367
c) CPC is deemed written in the definition of a
common carrier, p. 368

______________

* AB 62 (UP) & LL.B 66 (UP).

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IX. Loadstar Shipping Co., Inc. vs. CA, et al., p.

369
X. Significance of the Loadstar Ruling, p. 371
XI. Conclusion, p. 374

_______________

I. Introduction

Certificate of Public Convenience (CPC) is probably the

most important concept in public utility regulation. It is the
ultimate goal of franchising and a condition-precedent to
regulation. A public utility service not covered by a CPC is
an illegal enterprise and outside the pale of regulation. The
State recognizes the importance of CPC or franchise by
embodying a specific provision in the Constitution imposing
certain limitations to its grant (Art. XII, Sec. 11 of the 1987
Constitution). Apart from this recognition, the legislature
passes laws, as the need arises, creating regulatory bodies
(actually these are administrative bodies vested with the
power of franchising and regulation combined) to perform
the specialized task of issuing franchises to particular
types of public utilities and thereafter regulate or rein in
their operations. In a sense, a CPC is a manifestation of the
active exercise of the inherent prerogative of the State-
police power. Police power is exercised through the
legislative branch of Government and in turn delegated to
regulatory bodies, known as creatures of the legislature.
Through the CPC issued by regulatory agencies with the
concomitant power to cancel this authorization, the task of
promoting the general welfare through the imposition of
order, reason and system in the operations of public
utilities in the community becomes more organized and
effective.
Common carrier is another equally important concept in
public utility regulation. Like other types of public utilities
(electric, telecommunications, etc.) common carriers, which
pertains to transportation, are availed of by people every
daywhen they take buses, jeepneys or taxicabs to various
destinations, and/or ride ships or airplanes in going from
one island or place to another. The law requires
corresponding

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authorization or CPC for them to legally operate. In other

words, before they start operations, they have to apply for
authority to operate or for a CPC during which they are
duly screened and authorized by the regulatory agency
concerned. The State cannot afford unlimited and
uncontrolled entry into the business of common carriers let
alone allow anarchy or cutthroat competition in their
respective routes or areas of operations. It would be a
veritable formula for disaster if anybody with motor vehicle
were simply tolerated to ply the streets for passengers and
cargoes, or those with ships, to pick and drop passengers
and cargoes from port to port or those with airplanes, to
take to the skies at any time landing at any airport
carrying passengers and cargoes without any authorization
from the government regulatory agency concerned.
The idea of clothing common carriers with authorization
or CPC before operation is a means to control, monitor
and/or regulate their operations. The recurrent question is
whether or not the absence of CPC detracts in anyway from
the traditional concept of a common carrier. This question
was raised before and again, this time in Loadstar
Shipping Co., Inc. vs. Court of Appeals and The Manila
Insurance Co., Inc., G.R. No. 131621 dated September 28,
1999. Several questions were posited by the High Tribunal
in the case, but pertinent to this inquiry is whether or not
the lack of CPC issued to a transport carrier renders the
same merely a private carrier and not a common carrier.
Let us discuss pertinent preliminary matters before we
answer this interesting question.

II. Nature of a Certificate of Public Convenience

a) CPC defined and contents of a decision for public utility

service
A CPC is a formal order (now usually titled decision)
issued after a public hearing by a regulatory body which
grants a public utility service the right to render service to
a particular area (Mosher, Public Utility Regulation, p.
93, as cited in Rosal, Public Service Commission, p. 26,
1940 ed.). The Supreme Court in KMU vs. Garcia, Jr., 239
SCRA 383

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(1994) defined a CPC for land transport service as an

authorization granted by the LTRFB (Land Transportation
Franchising and Regulatory Board) for the operation of
land transportation services for public use as required by
law. This writer defines a CPC as a written authorization
for the operation of a certain type of public utility service in
a particular area granted to an applicant after due notice
and hearing by the franchising and regulatory body
concerned setting forth therein the terms and conditions of
the grant.
A CPC is often referred to and generally understood as
franchise, line, decision or certificate. Franchise
however, technically means a grant by the legislative
branch of the government to a natural or juridical person to
operate a public utility service. In any case, franchise or
Prankisa is often used interchangeably with CPC. Line
or linya is also used to refer to a CPC for transportation
because the latter includes a specific area or line/route to
be serviced. Decision is also used to refer to a CPC
because a written resolution entitled Decision granting
authority to operate is issued in favor of the applicant. This
is akin to the decision rendered by ordinary courts. It
states the nature of the application, the facts of the case,
the opposition filed by other operators adversely affected by
the application, the evidence of the parties, particularly
applicants proofs of the three (3) requisites for the grant of
the application (a. that applicant is a Filipino citizen or a
corporation 60% of its authorized capital stock owned by
Filipinos; b. that applicant is legally and financially
qualified to operate the proposed service; and c. that public
convenience and necessity shall be served in an adequate
manner with the approval of the application), the pertinent
laws and/or authorities, and the dispositive portion
declaring therein whether the application is granted or
denied. In case the application is unopposed or
uncontested, the decision is usually issued in a standard
form declaring therein that applicant has established those
three (3) basic requisites for the grant of the application.

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b) Form of CPC
This authorization to operate a public utility service is
referred to as a Certificate of Public Convenience because
the franchising and regulatory body before the war used to
issue a diploma-type certificate. It is fortunate that the
Supreme Court had reproduced a form of this Certificate
for future generation to see, in its decision in Batangas
Transportation Co. vs. Orlanes, 52 Phil. 455 (1928):

CERTIFICATE OF PUBLIC CONVENIENCE

To whom it may concern:

This is to Certify, That in pursuance of the power
and authority conferred upon it by subsection (1) of
section 15 of Act No. 3108 of the Philippine
Legislature,
THE PUBLIC SERVICE COMMISSION OF THE
PHILIPPINE ISLANDS, after having been duly
considered the application of ____________________ for
a certificate of public convenience the operation of
_____________________ in connection with the evidence
submitted in support thereof, has rendered its decision
on ______________ 192 ___ in Case No. _______,
declaring that the operation by the applicant
__________________ of the business above described
will promote the public interests in a proper and
suitable manner, and granting __________________ to
this effect the corresponding authority, subject to the
conditions prescribed in said decision. Given at Manila,
Philippine Islands, this ______ day of
________________, 192__.
PUBLIC SERVICE COMMISSION OF THE
Philippine Islands
By__________________________
Commissioner
Attested:
___________________________
Secretary

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At present, the Land Transportation Franchising and

Regulatory Board (LTFRB) the regulatory agency for
common carriers over land, does not issue such diploma-
type certificates of public convenience to applicant-grantees
owing to its impracticality given the numerous applications
it usually grants every month. On the other hand, the
Maritime Industry Authority (MARINA) issues this
diploma-type certificate to shipping service applicants
aside from the regular decision that it renders. This
practice is still practical for MARINA because there are
fewer applicants for shipping service franchises as
compared to applicants for land transportation service.
We quote a typical dispositive portion of a decision for a
land transportation service usually issued by the LTFRB
after the basic contents of the decision have been set forth,
as explained above:

WHEREFORE, by virtue of Section 16 (a) of Commonwealth Act

No. 146, as amended and Executive Order No. 202 dated June 19,
1987, this Board hereby approves the aforesaid application. Let a
Certificate of Public Convenience be issued to herein applicant
(________ Name of Applicant _________) x x x x.

Although there is a directive to issue a CPC, this is not

issued anymore and the decision takes the place of the CPC
as authority and legal basis to operate.

III. Rationale of CPC

In a landmark decision, Justice Jose P. Laurel declared

thatThe right of the state to regulate public utilities is
founded upon the police power, and statutes for the control
and regulation of utilities are a legitimate exercise thereof
for the protection of the public and the utilities themselves
(Pangasinan Trans. Co., Inc. vs. PSC, 70 Phil. 22 [1940]).
Police power, as indicated at the outset, is an inherent right
exercised by the legislature by passing regulatory laws
aimed at the maintenance of a well-ordered society and
achieving its general welfare. As stated earlier, through
these regulatory

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laws, the legislature also created franchising and

regulatory bodies that directly exercise and implement the
legislative will. The only way to regulate and limit entry
into the business of public utility is through a system of
franchising or granting of CPCs by these regulatory bodies
after applicants have qualified therefor. In the area of land
transportation, the basic rationale of a CPC is to prevent
anarchy in the streets, as well as promote public need and
convenience. Imagine the bedlam and disorder along our
thoroughfares, if anyone or everyone who can afford to buy
or assemble a jeepney or a bus simply plies or operates
along any route he fancies. There would be far worse traffic
jams than what we have now. There would be empty
passenger vehicles running the routes which means
nothing short of waste of energy. In a case decided as early
as the 1950s, the Supreme Court noted that buses
operating 1/2 or 1/3 full would mean ruinous competition,
which would eventually spell financial collapse for
transport companies. The end result is deterioration of
service and risks to human lives and limbs due to likely
accidents as they race for passengers along the road to the
ultimate prejudice of the riding public. As the High Court
concluded in that caseSo in the long run, the traveling
public would be the loser (Batangas Trans. Co. Inc. vs.
Bian Trans. Co., et al., 99 Phil. 918 [1956]). In other
words, public need and convenience would not after all be
served in a proper and suitable manner if entry of
transport vehicles in any routes is not controlled through a
prudent issuance of CPC. This holds true with all other
public utilities e.g. water and air transports, telephone
service, electric service, etc.
Without a CPC, the possible scenario would be land
transport vehicles, shipping vessels and airplanes
operating along their respective routes unregulated in
number and in their trips or time schedules as well as in
their fares. Then too, if electric plants and telephone
companies can simply put up facilities and render services
on top of existing ones, there would mush-room clusters of
electric posts and tons of electric and telephone wires along
streets. In purpose for issuance of CPC to common carriers
is explained in American jurisdic-

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tionThe purpose of issuing certificates of public

convenience and necessity is not the advantage and benefit
of the applicants requesting them, but primarily the public
convenience and general welfare. The object to be achieved
is to foreclose the inordinate use of public highways (13
Am. Jur. 2nd 628). Numerous public utility vehicles
running to and fro along the highways, aside from
contributing to overcrowding of vehicles therein and of
course, to traffic gridlock, also cause the destruction of
these thoroughfares. In our jurisdiction the Supreme Court
declared that the certificate which the PSC issues to
public service land transportation are of the public interest
because the purpose of the issuance of CPC, is to promote
the social and economic life of the people, by enabling their
activities in these fields to be carried out with utmost
convenience, economy and promptness possible (Pampanga
Bus Company, Inc. vs. Enriquez, 66 Phil. 645 [1938]). This
merely means that with CPC, a public utility operator can
render service with focus and direction without any
apprehension about any flaw in his authority to operate.

IV. Three (3) Requisites for the Issuance of a CPC

As mentioned above, and pursuant to law and settled

jurisprudence, there are only three (3) requisites for the
issuance of a Certificate of Public Convenience to an
applicant: a) Filipino citizenship, b) financial capacity, and
c) public need for the proposed service (Section 12, Com.
Act No. 146, as amended or The Public Service Act, as
amended; Rizal Light & Ice Co. vs. Mun. of Morong, et al.
vs. PSC, 25 SCRA 285 [1968]; and Angeles Vda. de Lat, et
al. vs. PSC and Roberto Diaz, 159 SCRA 180 [1988]).

a) Filipino citizenship
Filipino citizenship is required for the simple reason that
the business of providing public utility service to the
community is of utmost importance that it should at all
times be in the hands of our citizens or in corporations 60%
of the capital stocks are owned by our citizens. This
requisite is founded upon nationalism or the love of country
of a citizen who is

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expected to conduct public utility business with the

national interest in mind. If these public utility businesses
were in the hands of aliens, they may be used to oppress
the citizenry and strangulate the economy. Certainly, if
aliens were allowed to own or control a public utility
business, they could not care less if they bled the country
dry. In that event, they can simply fly out of the country
with their investments even ahead of them through
international banking. Also in times of national
emergencies or war the Constitution allows the State to
temporarily sequester and run important public utilities
when demanded by national interest (Art. XII, Secs. 17 &
18). If these utilities were in the hands of aliens, then the
exercise of these State rights in the national interest may
be delayed or even frustrated.

b) Financial capacity
Financial capacity of would-be operator is also important
because public utility business has a peculiar responsibility
to the public. In the first place, the operator should have
the capital to put-up and operate the proposed service with
the necessary equipment and facilities to maintain an
adequate and safe operation for the benefit of the clientele.
Although the ideal concept is one of adequate and decently
presentable service, the reality is a public utility business
with dilapidated equipment and service that leaves much
to be desired. In the second place, the operator should also
have the financial resources to pay claims from accidents
and other contingencies during operation. Again, although
the ideal concept is one of capability and willingness to pay
such claims, the reality is that operators generally cannot
and do not settle these claims for damages from accidents
and other contingencies.

c) Public Need
Public need is also important because public utility
operation is part business and part commitment to serve
the public. Public utility service should be in response to
the demand of public need. If there is no public need in a
certain area, it would be an utter waste of resources to
provide service therein. In fact there is no reason to grant
an application to serve a
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particular area if there is no public need therein or there

are a handful few inhabitants therein. In this case, service
would not be economically viable. The business part of
public utility operation demands that there should be
sufficient patronage to assure reasonable returns on
investment. What is the use of running empty public utility
vehicles? Public utility business usually demands a huge
investment for which the operator while supposedly
serving the public expects to earn also in the process. If
there is no public need or no public patronage for the
service, then the basic reason for the grant does not exist.
An application for public utility service, like one for
authority to operate a common carrier, is a commitment to
perform public service. This kind of business holds such a
peculiar relation to the public interest that there is
superinduced upon it public regulation (Munn. vs. Illinois,
94 US 1274, cited in Fisher vs. Yangco Steamship Co., 31
Phil. 1 [1915]) and as such it has a considerable impact
upon the daily lives of people. An applicant has the
unarticulated commitment to perform a civic duty to the
community. That is why the rates are regulated and fixed
by the regulatory body so as not to oppress the consuming
public. Any complaint charging a common carrier of
inefficiency or unjustified stoppage or abandonment of
service is sanctioned by the regulatory agency. In fact,
discourtesy, refusal to convey passengers, and other similar
shortcomings in the service, say in the area of
transportation, may be brought to the attention of the
regulatory body concerned for appropriate action. In
private enterprises, these concerns are hardly addressed by
the owners. Finally, although the ideal concept is that the
primary motivation for applications for a public utility
service should be to serve the public, and the secondary
motivation is to earn profits from the business, the reality
is the other way around.

V. Nature of a Common Carrier

a) Common carrier defined
Common carrier pertains to the movement of people and
things from place to place by means of transport equipment
either on land, water or air. The term common carrier has

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nothing to do with ordinariness of the carrier or the

description of the facilities used (although most of them are
really common looking). The term common pertains to the
open availability of the service to the common man or the
general public, like, facilities, for common use. It is also the
nature of a common carrier that all persons from all walks
of life, so to speak, have a right to ride or avail of its service
on demand. And when a franchised carrier refuses to
extend its services to legitimate traveler or commuter
without valid reason, sanctions may be imposed upon it.
Thus, a ship operating as a common carrier cannot refuse
the request of a shipper to carry dynamite and other
explosives (Fisher vs. Yangco Steamship Co., 31 Phil. 1
[1915]).
The New Civil Code defines common carrier in the
plural form, to wit: Common carriers are persons,
corporations, firms or associations engaged in the business
of carrying or transporting passengers or goods or both, by
land, water, or air, for compensation, offering their services
to the public (Art. 1732). It is also defined in the Public
Service Act, as amended, as one of the types of public
service which pertains to transportation of passengers and
freight. Sec. 13, par. (b) provides:

The term public service includes every person that now or hereafter
may own, operate, manage, or control in the Philippine, for hire or
compensation, with general or limited clientele, whether permanent,
occasional or accidental, and done for general business purposes,
any common carrier, railroad, street railway, traction railway,
subway, motor vehicle, either for freight or passenger, or both with or
without fixed route and whatever may be its classification, freight or
carrier service of any class, express service, steamboat, or steamship
line, pontoons, ferries, and water craft, engaged in the
transportation of passengers or freight or both, shipyard, marine
repair shop, wharf or dock, ice plant, ice-refrigeration plant, canal,
irrigation system, gas, electric light, heat and power, water supply
and power, petroleum, sewerage system, wire or wireless
communications systems, wire or wireless broadcasting stations
and other similar public services: Provided, however, That a person
engaged in agriculture, not otherwise a public service, who owns a
motor vehicle and uses it personally and/or enters into a special
contract whereby said motor

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is offered for hire or compensation, to a third party or third parties

engaged in agriculture, not itself or themselves a public service, for
operation by the latter for a limited time and for a specific purpose
directly connected with the cultivation of his or their farm, the
transportation, processing, and marketing of agricultural products
of such third party or third parties shall not be considered as
operating a public service for the purposes of this Act. (Italics
supplied)

b) Types of public services

Hence, in this long definition cum enumeration of the types
of public service, common carrier is mentioned as only one
of them. From the above definition, the following are the
types of public services:

1. Any common carrier;

2. railroad;
3. street railway;
4. traction railway;
5. subway motor vehicle either for freight or
passenger, or both with or without fixed route and
whatever may be its classification;
6. freight or carrier service of any class;
7. express service;
8. steamboat; or
9. steamship line;
10. pontines;
 11. ferries;
12. and water craft engaged in the transportation of
passenger or freight or both;
13. shipyard;
14. marine repair shop;
15. wharf or dock;
16. ice plant;
17. ice-refrigeration plant;
18. canal;
19. irrigation system;
20. gas;
21. electric light, heat and power;
22. water supply and power;
23. petroleum;
24. sewerage system;

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25. wire or wireless broadcasting stations; and other

similar public services. (Sec. 13 [b] CA 146).

The list of new types of public service grows and expands

as we advance in technology. There is the international
telecommunications gateway or carrier for long distance
calls around the globe. And with the development of
computer and information technology, cyberspace has even
become an area of common carrier operations by Internet
Service Providers (ISP).

VI. Elements of a Common Carrier

From the definition and discussion of the nature of a

common carrier, we can deduce the following elements:

a) Any persons, corporations, firms or associations;

b) Engaged in the business of carrying or
transporting;
 c) Carrying or transporting passengers or goods or
both;
d) Carrying or transporting passengers or goods or
both by land, water or air;
e) The carrying or transporting of passengers or goods
or both is for a fee or compensation;
f) Offering their services to the public as a general or
limited clientele, whether permanent, occasional or
accidental; (Art. 1732 of the New Civil Code and
Sec. 13 [b] of Com. Act No. 146, as amended)

The foregoing elements are present in other definitions of a

common carrier made by authorities on transportation laws
as well as in legal dictionaries. The definition provided by
the new Civil Code is not as comprehensive as that
provided by Sec. 13 (b) of the Public Service Act, as
amended or Com. Act No. 146, as amended.

VII. Nature of Private Carrier

a) Private carrier defined

The concentration of inquiry is on common carrier and
hardly are there studies on the nature of a private carrier.

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When a service is claimed as not a common carrier, it is

argued that it is a private carrier. But what exactly is a
private carrier? To say that a private carrier is that which
is not a common carrier is no contribution to knowledge.
We cannot define what is by saying what is not. In San
Pablo vs. Pan-tranco South Express, Inc., 153 SCRA 199
(1987) a land transportation company operated a water
transport service between Matnog, Sorsogon to Allen,
Samar and vice-versa with the use of its own RORO (Roll-
on and Roll-off) vessel without a CPC. This was objected to
by shipping operators along the route because it would be
operating a common carrier or shipping service without
proper authorization. It then argued that its vessel is a
mere private carrier exclusively for its own buses. This was
rejected by the High Court because it found out that there
were other vehicles and passengers that were also
transported by this vessel.
In the case under annotation, the appellant obviously
argued in the Court of Appeals that it was merely a private
carrier because it allegedly had only one shipper at the
time the vessel sank. This claim was rejected by the Court
of Appeals. Again appellant went to the High Court and
raised this question of whether its ill-fated vessel was a
private or a common carrier. Appellant contended that the
vessel was a private carrier because it was not issued a
certificate of public convenience, it did not have a regular
trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo. As decision
went, the High Court did not sustain this contention.
A private carrier is any person, corporation, firm or
association in possession of or using any equipment that
can transport passenger and cargoes through land, air or
water, exclusively for the formers use, under no obligation
to operate the same for public use or to serve the general
public or even a limited clientele. The essence of a private
carrier is the sole and exclusive use by the owner or
possessor of the transport equipment. Once said transport
equipment opens itself to serving even the client or
customer of the owner or possessor of the transport
equipment or even one or two (2) limited

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clientele for hire or compensation, this changes the

character of the carrier from private to common.

b) Two (2) Luzon Brokerage cases

The Supreme Court in the 1930s decided two (2) cases
involving the Luzon Brokerage Co. wherein in the later
case, it finally ruled what constitutes a private carrier and
common carrier. A pre-war firm, Luzon Brokerage Co.
owned and operated trucks for the exclusive use of its
customers in its brokerage business. In the first case,
entitled Luzon Brokerage Co. vs. Public Service
Commission, 57 Phil. 536 (1932), the firm was directed by
the then Public Service Commission to file the necessary
application for CPC since it was considered as a public
service or operating a common carrier. In interpreting Sec.
13 of Act No. 3108, as amended by Act 3316, the governing
public utility law at the time, the High Court ruled that it
was not operating a public service or a common carrier. In
other words, it was a private carrier.
However, in a subsequent case entitled Luzon Brokerage
Co., Inc. vs. Comision de Servicios Publicos y Fragante, 70
Phil. 148 (1940) decided eight (8) years thereafter, a
decision written in Spanish, an expanded concept of public
service was recognized as embodied in the new law at the
time. After the first Luzon Brokerage decision, Act No.
1308 was amended by Com. Act No. 454 which included in
the concept of a public service, or of a common carrier, as a
service that includes even to a limited clientele: que
encluye en el concepto de servicio publico, en relacion con los
vehiculos de moro, el que se presta mediante compensacion,
aun a una limitada clientela. Thus, the brokerage firm
was considered operating a common carrier even if it was
merely servicing the customers of this brokerage business.
This is still the prevailing view.

VIII. Is a CPC Necessary to be Classified as

Common Carrier?

a) Degree of diligence required of a common carrier

In all definitions of common carrier in statutory provisions
as well as in commentaries of authorities in Philippine and

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American jurisdictions the element of being a grantee of or

being in possession of a Certificate of Public Convenience is
not one of them. Hence. It would appear that a CPC is not a
necessary requisite for a carrier to be classified as a
common carrier. The law seems to sanction this view
because of the higher level of responsibility that belongs to
a common carrier towards the public as against a private
carrier. Under Art. 1733 of the Civil Code, Common
carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety
of the passengers transported by them, according to all the
circumstances of each case. A common carrier has the duty
to exercise a high degree of care in transporting goods and
passengers. In fact, under Art. 1756, it is also provided
that: In case of death of or injuries to passengers, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they observed
extraordinary diligence as prescribed in Articles 1733 and
1755.

b) Degree of diligence required of a private carrier

On the other hand, in the case of private carriers,
particularly with respect to shipping or sea transports, the
provisions of the Code of Commerce and not the Civil Code
govern. The degree of diligence is only ordinary as regards
a private carrier. The burden of proof of negligence is even
upon the plaintiff in the case of private carrier. The
authority is that: In an action against a private carrier for
loss of, or injury to, cargo, the burden is on the plaintiff to
prove that the carrier was negligent or unseaworthy, and
the fact that the goods were lost or damaged while in the
carriers custody does not put the burden of proof on the
carrier. (80 CJS, pp. 1044-1045, cited in National Steel
Corp. vs. CA, 283 SCRA 45).
The reason why the absence of a CPC does not change
the nature of a common carrier is well explained in De
Guzman vs. Court of Appeals, 168 SCRA 612, a case
copiously in the decision under annotation. In this case, a
person who hauled cargoes for a limited customer wanted
to escape the responsi-

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bility of exercising extraordinary diligence in the care of his

cargo which were lost by claiming that he was not
operating a common carrier as he did not have a CPC. The
High Court declared that: To exempt private respondent
from the liabilities of a common carrier because he has not
secured the necessary certificate of public convenience,
would be offensive to sound public policy; that would be to
reward private respondent precisely for failing to comply
with applicable statutory requirements.

c) CPC is deemed written in the definition of a common

carrier
The CPC in relation to a common carrier, or even to other
public utility service seems to be unique. It would seem
that while the prevailing law and jurisprudence do not
require a CPC in the concept of a common carrier, yet its
absence renders the operation as illegal or colorum, a
language wellknown to the transport industry. In other
words, a carrier has no business operating as a common
carrier or in serving the public or even a limited clientele if
it has no permit or authorization to do so from a transport
franchising and regulatory body. This means that it should
not be classified as a common carrier if it does not possess
the aforesaid permit or authorization to accord its
operation legality. Common carriers as defined by the Civil
Code under Art. 1732 are presumed to be duly licensed or
authorized transport operators or in possession of CPCs.
This element should be deemed written in that provision.
Otherwise, as stated above, the common carrier as defined
under Art. 1732 of the New Civil Code and even the much
broader term public service as relating to transportation,
or for that matter, to other utilities, under Sec. 13 (b) of
Com. Act No. 146, as amended, is an illegal or colorum
common carrier or public service for transportation.
Perhaps, there is no reason for the view that a natural
or juridical person operating a carrier without CPC shall be
benefited with a lower level of diligence or short of
extraordinary diligence. In fact, stronger sanctions are
warranted in the circumstances. Hence, the plea of absence
of CPC on the

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part of a carrier in the belief that this renders such carrier

a private one for the purpose of avoiding greater
responsibility seems to be out of place. First, absence of
CPC does not reduce a service to the status of a private
carrier from that of a common carrier; and second, the
nature of the carrier is determined not by the absence or
presence of CPC but by the kind of service provided
particularly whether the same is open to the public on a
general or even limited number and for hire or
compensation.
So is CPC necessary to be classified as a common
carrier? If the common carrier is legitimate as we should
assume such status for the common carrier defined under
Art. 1732 of the New Civil Code and SEC. 13 (b) of Com.
Act No. 146, as amended, the answer is that it is an
element deemed written in the law or definition. To repeat,
a common carrier without franchise or CPC is illegal and
the law did not have that in mind in the definitions
provided under the New Civil Code and Com. Act No. 146,
as amended. To repeat, absence of CPC does not change the
character or nature of the service from common carrier to
private carrier. Nor does it reduce the level of responsibility
if through other tests or by definition the service is actually
a common carrier.

IX. Loadstar Shipping Co., Inc. vs. CA, et al.

The basic facts of Loadstar Shipping Co., Inc. vs. Court of

Appeals and The Manila Insurance Co., Inc. goes along the
story of goods loaded in a ship, duly insured and said ship
meeting a natural disaster en route to its destination.
Loadstar Shipping Co., Inc. (Loadstar) in 1984 contracted
with a shipper to transport through its vessel named M/V
Cherokee lawanit hardwood and similar products from
Nasipit, Agusan del Norte to Manila. The wood products
were insured with an insurance company in the amount
equivalent to its value. The vessel carrying these products
was also insured. As fate would have it, the vessel sank off
Limasawa Island on its way to Manila resulting in the total
loss of the vessel and the cargoes.

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The insurance company after paying the shipper, as
subrogee sued Loadstar which pleaded lack of blame citing
force majeure since the sinking of the vessel was allegedly
due to bad weather. After hearing, the trial court ruled in
favor of the insurance company which decision was
affirmed by the Court of Appeals. Loadstar still went to the
Supreme Court and raised one of the issues pertinent to
this annotation: Is the M/V Cherokee a private or a
common carrier?
As pointed out earlier, Loadstar contended that the
vessel was a private carrier because it was not issued a
certificate of public convenience, it did not have a regular
trip or schedule nor a fixed route, and there was only one
shipper, one consignee for a special cargo. Loadstar relied
upon the case of Home Insurance Co. vs. American
Steamship Agencies, Inc., 23 SCRA 24 where the High
Court held that a common carrier transporting special
cargo or chartering the vessel to a special person becomes a
private carrier that is not subject to the provisions of the
Civil Code. And therefore any stipulation absolving the
owner from liability for loss owing to the negligence of its
agent is not void as regards a private carrier. This ruling
was upheld in the cases of Valenzuela Hardwood and
Industrial Supply, Inc. vs. CA, 274 SCRA 642) and
National Steel Corp. vs. CA, 283 SCRA 45).
The High Court did not find merit in the Petition and
affirmed the Court of Appeals ruling that Loadstar is a
common carrier. It held that: It is not necessary that the
carrier be issued a certificate of public convenience. And
this public character is not altered by the fact that the
carriage of the goods in question was periodic, occasional,
episodic or unscheduled. It cited its earlier decision of De
Guzman vs. Court of Appeals, 168 SCRA 612 and rejected
the cases (Home Insurance Co., Valenzuela Hardwood and
National Steel Corp.) invoked by Loadstar as not applicable
because of different factual settings.

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 X. Significance of the Loadstar Ruling

The Loadstar decision did not make any categorical

pronouncement abandoning or defining a new concept of
transport carrier service in public utility jurisprudence.
However, the rulings it has reaffirmed perhaps deserve a
second look. Let us discuss them:
a) The Loadstar decision in a sense reiterated the
holding on the distinction between private and common
carrier which appears to be settled in the cases of Home
Insurance Co., Valenzuela Hardwood, National Steel Corp.
and Home Insurance Co. as cited above. The gist of their
holdings is that a shipping company which enters into a
special carriage contract or charter contract with only one
shipper is a private carrier and not a common carrier and
therefore the degree of diligence expected of said carrier is
ordinary not extraordinary as set forth under the Civil
Code. Citing these cases, Loadstar argued that it was not a
common carrier but merely a private carrier since there
was merely a one shipper, one consignee for a special
cargo, among others.
This contention was rejected by the High Court when it
said that the facts of the Loadstar case and the three (3)
cited cases were different. It noted that: The records do
not disclose that the M/V Cherokee, on the date in
question, undertook to carry a special cargo or was
chartered to a special person only. There was no charter
party. The bills of lading failed to show any special
arrangement, but only a general provision to the effect that
the M/V Cherokee was a general cargo carrier. Further,
the bare fact that the vessel was carrying a particular type
of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel
from a common carrier to a private carrier, especially
where, as in this case, it was shown that the vessel was
also carrying passengers.
What is the legal implication of this holding? From the
language of the decision, it could be inferred that if the ship
was purely carrying a special cargo or was chartered to a
special person only then the carrier may be classified as
private

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carrier. In other words, if there is only one solitary

customer or client, the service is classified as merely that of
a private carrier. Is this ruling consistent with the long
established view of a common carrier?
The Loadstar decision even cited the De Guzman vs. CA,
supra case in support of the view that a CPC is not a
necessary requisite to be classified as a common carrier.
But said decision also clarified that Art. 1732 which defines
a common carrier does not distinguish between a carrier
offering its service to the general public i.e., the general
community or population, and one who offers services or
solicits business only from a narrow segment of the general
population. This narrow segment as per previous
decisions of the High Court may pertain to the limited
clientele in the definition of public service under Sec. 13
(b) of the Public Service Act, as amendedwhich could
mean even one solitary customer or client. This is the
holding in the second case of Luzon Stevedoring vs. PSC, 70
Phil. 148 (1940), earlier discussed. The brokerage firm only
catered to brokerage clients and there could have been
occasions that one customer at one time may charter its
truck or vehicle to transport the formers cargoes from the
pier to any destination.
Per Luzon Stevedoring decision, a brokerage firm with a
limited clientele or even a single customer served at one
time is already considered a common carrier. Hence, it was
directed to apply for a CPC which subsequent brokerage
firms or similar enterprises have been doing to the present.
In the Home Insurance and related cases, as well as in the
Loadstar case, by inference, the shipping company with
only one customer under a charter agreement is considered
a private carrier. What is the difference between a shipping
firm with a ship that undertook to carry a special cargo or
was chartered to a special person only for hire or
compensation with that of a brokerage firm who also enters
into a contract of carriage of goods for the use of its
customer to transport goods also for hire or compensation
from the pier to a destination outside thereof? Why is it
that a shipping firm catering to a single client or shipper
under a charter agreement or a special car-

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riage contract is considered a private carrier, whereas, a

brokerage firm that cater to an individual client also for
hire or compensation, is considered common carrier? (Note:
Lest, it be misunderstood, in the Loadstar case, it was not
classified as private carrier, but a common carrier because
there was no charter party and there were other
passengers in the vessel).
b) The Loadstar decision also upholds the ruling that it
is not necessary to be a grantee or holder of a CPC for an
operator of a transportation service to be classified as
common carrier. From the definition of common carriers
under Art. 1732 of the New Civil Code no where could it be
inferred that a CPC is an element thereof. But then, a
common carrier is supposed to operate a kind of business
which is impressed with public interest. As such it is
presumed to be a legitimate service or a duly enfranchised
service by the corresponding regulatory agency.
As stated earlier, a definition of a common carrier which
does not assume that it is an authorized or franchised
service is not an intendment of law. Otherwise, the
definition under Art. 1732 of the New Civil Code and under
Sec. 13 (b) of Com. Act No. 146, as amended would be
understood to pertain to an illegal or colorum transport
service. There is indeed a flaw in the argument that
absence of the CPC converts or changes a carrier service
from common to a private one. It is premised upon the
assumption that the CPC accords it a public character or
absence thereof reduces it to the status of a private carrier.
The public character of a carrier emanates from the nature
of the service, particularly, the existence of clientele served,
even a limited one. The presence or absence of
corresponding CPC determines the legal status of a
common carrier. As clarified in the decision of De Guzman
vs. CA, supra, even in the absence of a CPC, the high
degree of diligence and presumption of negligence in case of
breach of contract of a common carrier remain. The High
Court thus declared that a certificate of public convenience
is not a requisite for the incurring of liability under the
Civil Code provisions governing common carriers. That
liability arises the moment a person or firm acts as a
common carrier, without regard to whether or
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not such carrier has also complied with the requirements of

the applicable regulatory statue and implementing
regulations and has been granted a certificate of public
convenience or franchise. In other words, a non-franchised
common carrier has the same level of responsibility,
diligence and liability to its passengers and cargoes as set
forth under the New Civil Code as that which is duly
franchised.
This seems to be a ticklish legal point which perhaps
deserves further inquiry.

XI. Conclusion

The Loadstar case has addressed other issues apart from

the subject of this annotation. There was also the concept of
the ships seaworthiness and the legal implication of failure
to maintain such ship in a seaworthy condition. And there
was also the issue of the application of the theory of
limited liability vis--vis claims of negligence on the part
of the vessel owner or agent thereof. But the equally
significant matter is the seemingly unending search for
exact categorization of the concepts of private carrier and
common carrier. Then there is also the recurrent question
of whether the absence of a CPC converts or changes the
carrier service from common carrier to a private carrier.
The decisions that sustained the view that a shipping
company transporting special cargo or chartering the
vessel to a special person is a private carrier should
perhaps be reexamined in light of the Luzon Stevedoring
case of 1940 and the more recent De Guzman case.
Perhaps, such reexamination will somehow accord
consistency to the concept of a common carrier.

o0o

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